Home Remodeling Expected to Remain Strong and Steady into 2019

by Abbe Will
Associate Project Director,
Remodeling Futures

The robust pace of spending on home renovations and repairs is expected to stay strong over the coming quarters, according to our latest Leading Indicator of Remodeling Activity (LIRA). The LIRA projects that annual growth in homeowner remodeling expenditure will remain above 7 percent throughout the year and into the first quarter of 2019.

Strengthening employment conditions and rising home values are encouraging homeowners to make greater investments in their homes. Upward trends in retail sales of building materials and the growing number of remodeling permits indicate that homeowners are doing more—and larger—improvement projects.

While the overall outlook is positive, one area of concern is the slowing growth in sales of existing homes, since sales traditionally trigger significant renovation spending by both sellers and buyers. Even with this headwind, annual spending on residential improvements and repairs by homeowners is set to exceed $340 billion by early next year.

For more information about the LIRA, including how it is calculated, visit the JCHS website.

Using a Full Portfolio of Tools (Including Vouchers) to Expand Access to High-Opportunity Communities

by Barbara Sard
Center on Budget
and Policy Priorities

The three papers from the rich and provocative A Shared Future symposium that focused on what it would take for housing subsidies to overcome affordability barriers to inclusion in all neighborhoods provide a multi-faceted and nuanced set of approaches that would expand possibilities for lower-income, non-white families to live in higher-opportunity communities. While these are important approaches that should be part of the policy portfolio, efforts to expand opportunities should also recognize that tenant-based vouchers are, and will likely remain, the primary policy tool for enabling poor and near-poor families to live in higher-opportunity communities.

In his paper, Chris Herbert reminds us that, typically, the housing stock in high-opportunity communities is predominantly owner-occupied. So, as part of a comprehensive portfolio, it’s important to consider strategies to make it possible for low-income (and other) families of color to purchase homes in such neighborhoods, including those where rents are starting to rise. However, even a robust set of tools to overcome downpayment and credit barriers may not be sufficient to make for-sale homes in neighborhoods with good schools and other amenities in many regions within reach of low-income families.

Both Steve Norman and Margery Turner highlight the key role acquisition by committed owners of multifamily rental properties can play, both in keeping rents affordable in “emergent” (i.e., gentrifying) neighborhoods and in making more units available to families with housing vouchers in those and already higher-rent communities. Federal housing policy has neglected such acquisition strategies: grants are rarely available to reduce the amount of debt such purchases will require, and tax credits are restricted to new development or substantial rehabilitation. Like the King County Housing Authority, some other mission-driven organizations, such as the National Housing Trust, have patched together state or local assistance with private market debt (and potentially project-based vouchers) to make such acquisitions feasible. Facilitating loans and grants to purchase rental properties tied to long-term affordability restrictions – including obligations not to discriminate against voucher holders – should be a goal of federal housing policy, including housing finance reform.

While it’s important to include for-sale and multifamily acquisition strategies in a comprehensive strategy portfolio, tenant-based vouchers will likely remain the primary tool for enabling more poor and near-poor families to live in higher-opportunity communities. That’s true, given vouchers’ current scale — more than 2.2 million Housing Choice Vouchers are now in use — and their flexibility to rent virtually any type of decent-quality dwelling at a wide range of price points.

Yet vouchers can do much more to expand housing choice. The implementation of HUD’s new Small Area Fair Market Rent (SAFMR) policy is a promising step, but other federal policy changes are needed to create stronger incentives for housing agencies to promote better locational outcomes. It’s also vital to make more funding available, from public as well as philanthropic sources, to meet agencies’ additional administrative costs of promoting voucher mobility. And federal policy should not only permit but encourage agencies to target vouchers combined with mobility assistance to families with young children living in the most severely distressed neighborhoods.

Such efforts to foster inclusion may cost more, though experience with SAFMRs shows this isn’t always the case. But if we really care about outcomes for families over the long term, we can’t wait until there are sufficient resources to make housing affordable to all before we start paying attention to the types of neighborhoods families live in. The desperation and long-term harm of homelessness and housing insecurity create understandable pressure to spread the limited subsidy resources to help as many families as possible. Yet mounting evidence demonstrates the real long-term harm of growing up in a very poor, violent neighborhood and attending low-performing schools. Affordable housing alone doesn’t improve life chances; where families are able to live must also be a first-order concern, not one that we’ll pay attention to if and when we remedy the shortage of subsidies.  

While housing practitioners work to do the best job possible with the available resources, we must also build the political will to expand investments in housing subsidies, so that more families have the chance to overcome affordability barriers and live in communities of their choice. The Center for Budget and Policy Priorities, along with the National Low Income Housing Coalition and others, has just launched the Opportunity Starts at Home campaign, a long-term effort to achieve this goal. 

The Fair Housing Act at 50

by David Luberoff
Deputy Director

Fair housing can and should be a centerpiece of efforts to expand economic opportunity, asserted Dr. Raphael Bostic, President and CEO of the Federal Reserve Bank of Atlanta, who gave the 18th Annual John T. Dunlop Lecture at the Harvard Graduate School of Design on Tuesday, April 10 (watch video).  His talk, on the past, present, and future of the Fair Housing Act, was given one day before the 50th anniversary of President Lyndon B. Johnson signing the measure.

Bostic, who also served as Assistant Secretary for Policy Development and Research at the U.S. Department of Housing and Urban Development (HUD) from 2009 until 2012, explained that decades of research show the strong positive impacts that neighborhoods can have on children's education and future earnings. Given this, he noted, it is in everyone's interest to support efforts to expand opportunities for all families. "Fair housing is a key to economic mobility," he explained. "It is an economic development issue as well as a community and personal development issue."

Bostic went on to discuss the two main strategies for achieving the law's ambitious (and, in many cases, unfilled) goals. One approach has been enforcement of the fair housing act’s prohibition on discriminatory treatment in the housing market– including actions brought by HUD against communities, and sometimes brought against HUD by activists and non-profit groups. The other strategy derives from the act’s mandate that federal grantees also have an obligation to affirmatively further fair housing, taking steps to promote integration and not just combat discrimination. During his HUD tenure, Bostic was instrumental in developing a new approach to structuring how HUD-funded communities should go about identifying and implementing such affirmative steps.

While the former approach can achieve some success, it can ultimately produce only limited results, he observed. However, if carefully designed, the latter strategy has significant potential, asserted Bostic, as plans designed by the communities themselves with input from local stakeholders have a greater chance of being actively embraced. Given the current administration's efforts to slow and roll back some of those efforts, in the short run, enforcement efforts are likely to be the primary way in which supporters of fair housing will achieve their goals, he said. However, in the long run, people and communities will come to adopt more proactive approaches if only because an increasing number of them understand that America's long-standing history of upward economic mobility is at risk and that fair housing can be part of a solution to making sure that the next generation (and the ones that follow) continue to have access to the American Dream.

Have Incomes Kept Up with Rising Rents?

by Whitney
Airgood-Obrycki

While renters’ median housing costs rose, in real terms, by 11 percent between 2001 and 2016, their incomes fell by two percent, according to our latest America’s Rental Housing report. Moreover, these changes were unevenly distributed across renter households, primarily affecting those who are least able to afford it. Housing costs (rents plus utilities) consumed an increasing portion of household income for renters who made less than the median income for all households. In contrast, incomes increased more than housing costs for higher-income renter households (Figure 1).

Notes: Income quartiles include both owners and renters. Median housing costs and household incomes are in constant 2016 dollars, adjusted for inflation using the CPI-U for All Items. Housing costs include cash rent and utilities. Indexed values are cumulative percent change.

Source: JCHS tabulations of US Census Bureau, American Community Surveys.

Illustratively, the median monthly income for renters in the bottom income quartile fell by $50, dropping from $1,270 in 2001 to $1,220 in 2016 (a 4 percent decline). However, their median monthly housing costs increased by $70, rising from $690 to $760 (a 10 percent increase). This means that after paying for housing, renters in the bottom income quartile had less than $500 left to cover all other expenses (Figure 2), such as food, health care, insurance, transportation, and savings they could use for emergencies, retirement, education, repairs, or other needs.

Notes: Income quartiles include both renters and owners. Housing costs include cash rent and utilities.

Source: JCHS tabulations of 2016 American Community Survey.

While residual incomes for the lowest-quartile group are slightly higher than they were in recent years, they are still 18 percent less than in 2001, when these households had $600 in residual income (in inflation adjusted dollars). Moreover, 48 percent of households in the lowest-income quartile consist of more than one person, and 27 percent have at least one child present.

The situation is particularly bleak for renters in the lowest income quartile who spend more than 30 percent of income on housing. These cost-burdened renters had a residual income of only $360 per month in 2016, down 18 percent since 2001. In contrast, households in the same quartile that weren’t cost burdened had a residual income of $1,180 in 2016, down 6 percent since 2001. Part of this difference is due to the higher rates of cost burden among the very lowest-income renters within the quartile. Even so, cost burden reduces residual income.

As noted above, the story is quite different for higher-income renters. Monthly housing costs for renters in the top income quartile rose by $320, increasing from $1,360 to $1,680 (a 24 percent rise). However, their monthly incomes rose by $890, increasing from $10,440 to $11,330 (a 9 percent rise). As a result, these renters saw their residual incomes increase from $9,030 in 2001 to $9,660 per month in real terms.

What Would it Take for Housing Subsidies to Overcome Affordability Barriers to Inclusion in All Neighborhoods?

by Katie Gourley, Graduate Research Assistant

The design of housing voucher programs, site selection for new subsidized units, and federal, state, and local housing programs can all encourage—or hamper—efforts to create more inclusive residential communities. Three new papers released today by the Joint Center for Housing Studies examine many of the issues and historic legacies that policymakers need to address as they strive to meet this goal. The papers, which were presented at A Shared Future: Fostering Communities of Inclusion in an Era of Inequality, a symposium hosted by Joint Center last year, are:

Margery Austin Turner,
Urban Institute

What Would it Take for Housing Subsidies to Overcome Affordability Barriers to Inclusion in All Neighborhoods? by Margery Austin Turner, the panel moderator, begins by noting that, while there are many benefits associated with moving to higher-opportunity neighborhoods, the voucher and tax credit programs that are currently the largest source of federal subsidies for affordable housing often fail to offer those opportunities to low-income families. Part of the problem, she argues, is that too often, policies aimed at expanding access to opportunity-rich neighborhoods (i.e. fair housing policies) are pursued separately from housing subsidy policies, rather than as part of a strategic portfolio of investments. Such a portfolio approach would use different investment and interventions to four different types of neighborhoods. In severely distressed neighborhoods, subsidized housing probably should not be further concentrated, while in stable, low-income neighborhoods, subsidized housing investments should focus on renovation and preservation of the affordable housing stock. In emergent neighborhoods, preservation and expansion of affordable housing options should be the top priority, while in opportunity-rich neighborhoods, housing subsidies should be deployed (along with other policy tools) to expand affordable housing options.

Stephen Norman &
Sarah Oppenheimer,
KCHA

Expanding the Toolbox: Promising Approaches for Increasing Geographic Choice by Stephen Norman and Sarah Oppenheimer reviews the King County Housing Authority's (KCHA) ambitious efforts to use federal housing subsidies to provide families with broader neighborhood choice. Informed by growing national evidence on the effects of neighborhood quality on life outcomes, they note, KCHA has used both tenant-based mobility approaches and site-based affordability approaches to expand low-income families' access to a wider set of neighborhoods in the county, which includes Seattle and many surrounding communities. KCHA's tenant-based mobility strategies have included offering to pay higher rents in higher-opportunities areas and providing extensive counseling to voucher holders. The site-based strategies have focused on acquiring and preserving housing and using federal vouchers to support new development in higher-opportunity areas. As a result, about 31 percent of KCHA's federally-subsidized households with children currently reside in low-poverty areas.

Christopher Herbert,
JCHS

Expanding Access to Homeownership as a Means of Fostering Residential Integration and Inclusion by Christopher Herbert, Managing Director of the Joint Center for Housing Studies, notes that efforts to foster more inclusive communities have to confront issues related to housing affordability not only in more expensive, higher-opportunity neighborhoods, but in gentrifying ones as well. While many discussions about these issues focus on subsidized rental housing, Herbert argues that efforts to make homeownership more affordable should also be part of the portfolio of approaches used to foster more racially-, ethnically-, and economically-integrated communities. Potential appealing policies, he contends, fall into four broad categories: changes in federal income tax policy related to the mortgage interest deduction and savings; increased support for housing counseling; maintaining or modifying "duty to serve" obligations that affect mortgage lending; and better targeting and potentially expanding funding for downpayment assistance. He notes that, while these are not the only areas where action is needed to expand residential choice, they are critical (and sometimes overlooked) elements that should be included in a broader effort to foster more inclusive communities.

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Additional papers from the A Shared Future symposium are available on the JCHS website. The papers will also be collected into an edited volume to be published later this year.